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The legal battle between VANDA Pharmaceuticals, Inc. and the
United States government provides guidance on the minimum
requirements that the government must meet to protect trade secrets
provided during the regulatory approval process for
pharmaceuticals. The case, which involves alleged unlawful
disclosure of trade secrets by government officials to generic drug
competitors, presents several issues of first impression.
VANDA did not assert a trade secret misappropriation claim, but
rather asserted a Fifth Amendment takings claim. (VANDA’s
breach of implied-in-fact contract claim was dismissed). At the
core of the case are two of Vanda’s brand-name drugs, Fanapt
and Hetlioz. VANDA claimed that Food and Drug Administration (FDA)
officials improperly shared the company’s trade secret and
confidential manufacturing information with generic competitors by
disclosure through the review process for generic drug
manufacturers’ proposed competing products. VANDA alleges that
the disclosure not only breached the FDA’s duty of
confidentiality with VANDA, but also resulted in considerable
economic harm to the company and violated the statute preventing
the unauthorized disclosure of trade secrets by federal government
officials who “obtain that information in the course of their
official duties.” 18 USC § 1905.
On January 18, 2024, the court denied the government’s
motion to dismiss regarding the Fifth Amendment takings claim. The
court stated that the FDA’s review and approval of NDAs falls
squarely within the scope of the federal agency’s statutorily
authorized duties. Furthermore, unlawful acts are not per se
unauthorized for purposes of engaging in a Fifth Amendment takings
analysis, and can still be imputed to the government. In other
words, even if the government employees’ acts eventually were
found to be unlawful, the actions could still constitute
unauthorized taking by the agency. The court declined to determine
if this was a per se or regulatory taking at this stage.
The Court also left open the question of whether VANDA even had
any trade secret or proprietary rights in the disclosed
information. As the legal proceedings unfold, VANDA’s
confrontation with the U.S. government will impact how trade
secrets are handled within the pharmaceutical industry’s
regulatory framework, and what remedies are available to future
plaintiffs.
Originally published on February 22, 2024
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